The benchmark Sensex surged to a new lifetime high on Monday, ending above the 22,000 mark for the first time on the back of heavy buying as strong FII inflows kept up the momentum aided by pre-election optimism and cheering news on macro economic fundamentals.
The benchmark index gained 300.16 points or 1.38% to close at 22,055.48 points. Intraday, it hit 22,074.34 points. The broader Nifty also rose, gaining 88.60 points or 1.36% to end at 6,583.50.
The previous closing peak of Sensex was 21,934.83 on March 10, and its intra-day record was 22,040.72, set last Tuesday.
Buoyed by the rally, economic affairs secretary Arvind Mayaram said on Monday that, “I believe the economy has stabilised and that is reflected in rupee and stock markets. Going forward, I think we will see growth numbers also improving.”
“The pre-election rally on Dalal Street continues amid strong FII (foreign institutional investor) flows and all-round buying,” said Amar Ambani, head of research, IIFL.
“India’s macros are now good,” said Vaibhav Agrawal, vice-president research, Angel Broking. Negative cues such as inflation and the current account deficit are down, he said.
Domestic institutional investors (DIIs), however, are not participating in the current rally.
“DIIs (mutual funds, life insurance companies etc) generally look at historical data and compare the macro economic data to these. From that perspective the situation is not so attractive,” said Tirthankar Patnaik, director at Religare Capital Markets.
So FIIs find India’s macro economic points impressive compared to other emerging markets, but for India-focussed DIIs, a comparison to historical data such as GDP growth paints a not-so-rosy picture. “Foreign investors reward India for controlling inflation; that is yet to be seen from DIIs,” said Patnaik.
FIIs have invested $1.8 billion in Indian equity since January.
Only a positive election result with a clear majority will motivate DIIs, said Patnaik.
A strong government would mean that the investment cycle would pick up, and money would flow into sectors that have not been faring well such as capital goods and banking, said Agrawal.